Primary research was potentially seen as the most appropriate means of collecting data as it enabled me to gather direct information regarding consumer preferences and perceptions of the issue. Primary Research could be conducted in many ways such as focus groups, choice experiments, interviews and surveys. For the investigation a Questionnaire and Likert- Scales were seen to be the most suitable methods of collecting information.
The Questionnaire consisted of 13 questions, commencing with straightforward questions regarding age, sex, educational levels and income. These questions were necessary as factors such as income and education were important attributes in determining whether these factors affect the purchasing of Fairtrade products. A question was also asked in regards to which supermarkets consumers shop at as this would be useful to identify if consumers from a particular supermarket purchase more fair-trade products in comparison to another supermarket. Open questions were also asked as this would be beneficial to gain detailed consumer responses in comparison to a closed question.
A Likert scale was also seen as an appropriate method to be used to identify consumer responses. Pictures of the Fairtrade label were shown, as well as statements such as ‘fair-trade guarantees a fair price to farmers, these payments are invested in food, shelter, education and economic independence’ Respondents were asked to indicate whether these statements would increase their purchase, decrease their purchase or have no effect in regards to consumption of Fairtrade products therefore respondents would specify their level of agreement to the statements.
Both methods of Questionnaire and Likert scale have many advantages for this research proposal as they carry almost 100% response rate and data could be gathered in a relatively short period. The use of Likert scales also allowed differentiation in responses rather than a closed yes/ no response, therefore allowed further analysis on consumer behaviour and perceptions, which is a core objective in the research proposal.
For both experiments, individuals are only ever asked to profile themselves into brackets therefore remain anonymous which may generate a more honest response. Participants also have the option to withdraw from the research at any point and are informed of this by an information sheet being attached to the front of the questionnaire which explains the purpose of the study. This should make respondents feel at ease, thus generate honest and sincere responses.
The limitations of using a questionnaire and Likert Scale method are that there is no interaction or discussion with consumers therefore cannot generate a greater response on issues that may be of concern. A sample size of 100 respondents were asked as this seemed like an appropriate amount to gather critical data to analyse responses. Respondents were categorised in regards to which supermarket they shopped at, as this would give a balanced indication on consumer purchasing behaviour in various supermarkets.
In addition to this, I also took pictures of Fairtrade products in Tesco, Sainsbury’s, Asda and Morrison’s to examine positioning, range, price and availability of products.
Secondary data
Secondary data would also play an imperative role in gathering information about fair trade. Secondary data is data that is not designed for the specific research but was designed for some other purpose.
Secondary data would include journals, articles, and sales figures on fair trade goods as all this would be helpful in providing information to complete the aim of the report. The theory of planned behaviour from Consumer Choice seems to be the most appropriate framework to use in terms of establishing the mindset behind consumers purchasing of fair trade commodities, therefore would use this theory in relation to consumers purchasing of fair trade commodities.
1.5- Report Structure
The following chapter would look at the history of fair-trade in order to gain a better understanding of the origins of Fairtrade; it would also look at recent developments of the Fairtrade market. In addition to this, small case studies would be conducted to examine the role of the supermarkets and their efforts in promoting fair-trade products. The third chapter would include the theoretical framework, this would be followed by the results of the primary research and finally conclusion and evaluation on the study.
2- The Fair Trade Movement- History, Definition and recent Developments.
2.1: Background to trade.
From the early 14th Century, originally the word ‘trade’ described a path or track marked out by a passage of human feet. It was also applied to the course of a ship, and from extension it also came to suggest a way of life. The meaning of ‘trade’ altered; people who were described to follow ‘a trade’, the craft of a stonemason, tailor or a carpenter, standing between ‘professional’ and ‘labourer’ in the hierarchy of class (Wells and Nixon).
Only in the 20th Century, did ‘trade’ come to signify exclusively the exchange for things for profit (Wells and Nixon). In the 19th Century, industrial capitalism spread around the world mainly through European empires. As industrial capitalism grew in wealth and power, foreign trade also increased. The theory of competitive advantage was deployed in the early 19th Century, to explain why trade would be better for everyone especially industrial capitalists. The notion of comparative advantage is usually attributed to the British millionaire stockbroker and entrepreneur David Ricardo. ‘Comparative advantage’ was a refinement of Adam Smiths theory of ‘absolute advantage’. According to this theory, every part of the world has an economic advantage of some sort, for example Britain in the early 19th Century had an advantage in the industrial manufacture of cloth (Wells and Nixon). The former British colony in America on the other hand had an abundance of agriculture land, a shortage of urban labour and the right climate for growing cotton. Therefore, it would make sense for America to send cotton to manufacture into cloth in Britain and to buy cotton cloth from Britain in return. Both countries would be better off this way as they would be making the most of their advantage and the ‘international division’ of labour, in comparison to if each country tried benefiting from solely each of their advantage rather than trading with each other.
By the 1970s the failures of ‘import substitution’ were obvious, and ‘export led’ economic growth began. Deregulation removed the idea that governments could intervene when they wished. These changes served Western countries well, many of the South countries (i.e. the so called ‘developing countries’) remain today just as
they have always been, entirely dependent on producing basic commodities like cotton for world markets. It has been recognized that such a system of world trade is extremely unfair, as world trade encourages inequality. The wealth of unrestrained capitalism accumulates, making the rich relatively richer and the poor relatively poorer, and thus the gap between the two is widening at an accelerating rate. Fairtrade counteracts this. It is a grassroots consumer movement aiming to help disadvantage producers increase their access to mainstream markets.
2.2: Fair Trade
Fair trade developed into a relatively small but international movement in the 1960- 1970s. Food products were developed in the 1980s, preliminary with coffee which was marketed originally as ‘Campaign’ coffee in the UK (Durham Business School).As the movement gathered momentum, a number of umbrella bodies were formed which included International Federation for Alternative Trade (IFAT), known now as International Fair Trade Association which was established in 1989 as a worldwide membership organisation bringing together both producers and buyers. In the UK, the Fairtrade Foundation was formed in 1994 and then became a member of the Fairtrade Labelling Organisations International (FLO) when it was established in 1997. These two organisations have been particularly significant in the growth of Fair Trade food products with FLO providing the worldwide standard setting and certification process that allows the Fairtrade Mark (a labelling device that guarantees that FLO standards have been met) to be applied to particular products.
Fairtrade can be defined as:
‘A trading partnership, based on dialogue, transparency and respect that seek greater equity in international trade. It contributes to sustainable development by offering better trading conditions to, and securing the rights of, marginalized producers and workers—especially in the South. Fair trade organisations (backed by consumers) are engaged actively in supporting producers, awareness raising and in campaigning for changes in the rules and practice of conventional international trade’ (Durham Business School)
2.3: Fairtrade Mark Scheme, Chronological Order- Table 1
- The Fairtrade Foundation was established by CAFOD, Christian Aid, New Consumer, Oxfam, Traidcraft and the World Development Movement. These founding organisations were later joined by Britain's largest women's organisation, the Women's Institute.
1994-The first Fairtrade certified product Green & Black’s Maya Gold Chocolate made with cocoa from
Belize is launched, shortly followed by Café direct coffee and Clipper tea.
1996 -The first in a range of Percol single origin and organic Fairtrade coffees is launched
1997 -In January Fairtrade coffee becomes widely available to the catering trade and a campaign is
launched to target restaurants and institutions.
1998 The first honey to carry the FAIRTRADE Mark is launched by Equal Exchange.
Bristol, Nottingham, Bath and Norwich City Councils become the first local authorities to convert
to Fairtrade coffee and tea.
- - January the first MORI poll is carried to measure awareness of the Fairtrade Mark.
Insurance giant CGU (now AVIVA) is the latest large company to offer staff coffee, tea and hot
chocolate with the FAIRTRADE Mark, through its vending machines.
2000-In January, The first bananas to carry the FAIRTRADE Mark are launched in over 1,000 Co-op stores.
Other supermarkets swiftly follow suit.
-March sees the launch of Co-op Fair Trade Milk chocolate bars, the first supermarket Own Label
FAIRTRADE Mark product.
.
2001The retail value of annual Fairtrade sales reaches £30 million - equivalent to £1being spent every
second.
Fruit Passion, the first range of fruit juices to carry the FAIRTRADE Mark, is introduced into
Supermarket
.
2002- In January, Colombian roast and ground coffee is the first of a wide range of Sainsbury’s own brand
FAIRTRADE Mark products and the first Fairtrade
-The new international FAIRTRADE Mark is launched by Harry Hill at the Contemporary Applied
-Arts gallery in London, replacing the interlocking ‘F’ symbol. The Fairtrade Foundation website is
re-launched.
-Sainsbury’s sells around 1million FAIRTRADE Mark bananas a week and offers Own Label
FAIRTRADE Mark coffee, tea, chocolate.
-In September, the first supermarket Own Label instant coffee granules to carry the FAIRTRADE
Mark, are launched by Co-op in 1,000 stores.
-The UK’s largest retailer, Tesco, starts selling FAIRTRADE Mark bananas. Co-op, Sainsbury’s,
Waitrose, Safeway and Asda already sell FAIRTRADE Mark bananas.
2003- A MORI Poll shows recognition of the FAIRTRADE Mark is now at 25% and understanding of
what the Mark means stands at 33%.
-Fairtrade oranges from South Africa are launched.
2004In September, Marks & Spencer switches all the coffee sold in its 198 in-store Café Revives to Fairtrade
The number of Fairtrade retail products reaches 350.
Tesco unveils its Own Label range of Fairtrade products.
2005-In March the declaration of Manchester and Sanford as the joint 100th Fairtrade Town.
- The FAIRTRADE Mark, is winner of the Special Recognition prize in the 'Media and Services’
2006- Retailers of products with the FAIRTRADE Mark are estimated at £290m, up 46% from 2005, with
growth coming across all product areas.
- Over 1,500 Fairtrade retail and catering products available in the UK.
-The first Fairtrade ice cream made with Fairtrade certified sugar is launched with Ben & Jerry’s
Fairtrade Vanilla.
-The Fairtrade at Work campaign is launched by the Fairtrade Foundation.
2007 - Loose Fairtrade certified bananas are launched by Sainsbury’s and Waitrose.
-The Fairtrade Foundation is awarded The Directory of Social Change’s ‘Social Change Award’ in
the category of Influencer.
-A TNS public survey commissioned by the Fairtrade Foundation reveals that awareness of the
FAIRTRADE Mark has risen to 57% of the adult population.
2008- The Co-op switches all of its Own Label hot beverages to Fairtrade.
-Tate & Lyle announce their commitment to convert 100% of its retail branded sugar to Fairtrade.
Source: Fairtrade Labelling International History.
The Fairtrade Foundation licences the consumer label, the Fairtrade mark in the UK (refer to Appendix A), to products which meet internationally recognised standards of Fairtrade. There have been many developments in terms of marketing and distribution of Fairtrade products in the retail sector with many supermarkets and smaller stores supporting the cause and trying to create awareness through its marketing campaigns and its Fairtrade logo, however what role does Supermarkets play in promoting Fairtrade certified products?
2.4- Supermarket and Retailer Response
Supermarkets and UK retailers play a vital role in the success of Fairtrade practises, as they have the power to influence consumers through marketing and promotional activities. The Fairtrade scheme was established in the 1990s, however the year of product entry for companies in the food industry was 1996. There are various reasons for entry of Fairtrade products in retail markets, with a major reason being Fairtrade products being demanded and required by customers. Ethical issues and corporate social responsibilities are becoming more significant to consumers, therefore Supermarkets and UK retailers may have identified a gap in the market, therefore choosing to source with integrity to meet market demand.
Supermarkets have acknowledged the need for Fairtrade certified products in the market; however factors have been highlighted as hindering the growth in the Fairtrade market, although consumers concerns about fair-trade issues are the key to driving the market: availability, price and range are citied as three inhibitors (The Grocer Analysis)
- Availability: the demographic profile of a supermarket area or problems over consistency of supply can affect the availability of Fairtrade commodities.
- Price: changes in production systems in Fairtrade markets increase the cost of production, which results in higher premiums. This factor may be a barrier to growth as consumers may not be willing to pay such a high premium for Fairtrade products.
- Range: Fairtrade currently have a relatively small number of products which can inhibit the growth of the Fairtrade market as consumers would expect a wider range, and more choice whilst making a purchasing decision.
Even though Fairtrade product range has increased over the years, there is scope to expand its product range however this implies greater product development which takes longer than conventional products taking into consideration the standards of Fairtrade that need to be met. However the Fairtrade market has been growing successfully year on year, with product range and availability becoming more prominent to Supermarkets and UK retailers.
2.4.1: Case Studies
Short case studies have been derived to consider retailers attitudes and perceptions towards Fairtrade, reflecting the range of activities involved in promoting Fairtrade and considering how important it is for each retailer to source with Fairtrade certified products.
2.4.2: Co-operative Group
The Co-operative Group believes in conducting business fairly, honestly and democratically, in a world where exploitation of the weak, few rights for workers, unfair trading practices and poverty exists.
In 2000, Co- op developed their own label range of Fairtrade products, currently Co-op stocks over 130 Co-operative products and over 50 branded Fairtrade products making it the largest range of Fairtrade commodities in any UK supermarket.
In addition to the more obvious Fairtrade products such as bananas, coffee and tea, own label variety stretches across a range of no less than 16 different fruits, cakes, fruit juices, and condiments such as cranberry sauce, and wines. Sales across the Co-op exceeded £40M in 2006 - which represents just under a third of the grocers' Fairtrade market (The Co-operative).
Growth rate has been exceptional, due to continual product development, major initiatives such as converting entire ranges of the own brand coffee and chocolate bars to Fairtrade, and heavyweight advertising (including national TV), promotions and advocacy work.
We have come a long way in a relatively short space of time, but most of the market development is ahead of us. The FAIRTRADE Mark is growing rapidly in recognition, but at 49% consumer awareness levels, there is plenty more scope to build the market. And there is still an education job to do on many of those that recognise the Mark, but may not fully understand what it means. Fairtrade in total is still a small sector of the market, but The Co-operative has demonstrated that with commitment, it has the potential to become significant. Within ground coffee for example, 14% of sales nationally are Fairtrade, whereas over 90% of ground coffee sold through The Co-operarive is now Fairtrade.
How do you merchandise Fairtrade products - alongside their non-Fairtrade equivalents, or all together in a dedicated section?
Do you promote Fairtrade products in-store, advertise them or otherwise promote them above the line?
Our objective is to mainstream Fairtrade and so we merchandise products on fixture next to 'conventional' equivalents where the purchase decision is made. We also have a secondary 'free standing' display unit in many of our stores, which allows us to dual merchandise, drive distribution of the Fairtrade offer and improve accessibility particularly in our smaller stores. Fairtrade epitomises the 'co-operative difference' and we do invest heavily in advertising and promotional support, using national TV, radio and press as well as specialist and consumer press.
2.5- The market and Consumer Awareness.
The Fairtrade Foundation has conducted an annual survey since 1999, to examine consumer attitudes towards Fairtrade certified products. TNS Omnimas survey conducted in 2007 showed that:
- The Fairtrade mark is recognised by 3 in 5 British adults, as 57% can identify the independent Fairtrade consumer label, up five points in just one year, and 53% of respondents correctly associated the symbol with a better deal for producers in the developing world.
- The highest recognition of the FAIRTRADE Mark is now amongst the 25-34 age group (a 19 point increase to 55%). People in this group are now just as likely to buy Fairtrade products regularly as the older age groups.
- Fairtrade bananas are the best selling Fairtrade product with sales topping £150m, an increase of 130%. 1 in 4 bananas sold are now Fairtrade.
- Fairtrade coffee sales rose 24% to over £117m from 2006
- Fairtrade tea rose 24% to just over £30m. And recent commercial developments mean Fairtrade tea should account for a tenth of tea sold in the UK by the end of 2008
Figure 1.1
Source: Durham Business School
The first Fairtrade label, with the name Max Havelaar, was created in the Netherlands in 1988 after a long discussion within an NGO over how to respond to a very concrete petition from a Mexican cooperative of coffee producers, who requested help in marketing their product in Europe. Although this type of trade questioned the mechanisms of the dominant market system and proposed a fairer relationship between producers and consumers, it was far from resolving the problems of selling Third World products. It was essential, then, to increase sales opportunities, and instead of inviting consumers to buy at alternative stores, it was more profitable and would target a wider consumer base to offer fairly traded products at places where consumers normally shop: in the large distribution channels.
This also implied a change in the message: to broaden the spectrum of the amount of consumers interested in buying these products, it was necessary to appeal more to humanitarian sentiments than to political convictions. Following several months of discussion, and facing the difficulty of penetrating a Fairtrade market that was highly concentrated in the hands of a few oligopolies, the organisation opted to create a distinctive label. This label (Max Havelaar), printed on packages of any established brand, in mass distribution centers would certify, for the consumer, that the product satisfied the conditions of fair trade, beginning with a fair price that guaranteed better living conditions for the growers. This fair-trade product would also be sold at a premium price than the conventional products
Image 1
The Fairtrade label altered in 2003, previous to this there were seven different Fairtrade marks used in 17 countries which could be exemplified by image 2, but the current International Fairtrade logo makes the brand universally recognisable by consumers (Image 1). It is visible that Fairtrade labelling organisations are marketing Fairtrade in different ways; however there is scope for much greater analysis on consumers which could potentially improve Fairtrade visibility and responsiveness.
3: Theoretical Framework
3: Economic factors influencing food choice:
There are many profound and significant influences on food choices, which include cultural and traditional factors, the presentation of food via advertising, packaging and other marketing activities to promote a particular brand. These factors are all controllable by food manufacturers; however, a major and significant influence of food choice which is not controllable by organisations is that of the relationship between income and amount of food purchased.
In 1857, the Prussian statistician Ernst Engel published the results of a study in which he analysed the expenditure patterns of families with different level of incomes. As far as expenditure on food was concerned, he found out that ‘the poorer a family is, the greater the proportion of total expenditure it must use to procure food. The wealthier the family, the smaller the share of expenditure on food’. By looking at the simple diagram of an Engel curve it suggests that as income increases per household, consumers spend a proportionally less amount of their expenditure (Q1) in comparison to those with low incomes who spend a higher proportion of income on food (Q2).
Figure 3
Families with low incomes tend to be comprised of larger households, for these households the purchase of ‘inferior goods’ such as basic foodstuff like potato, bread, butter etc are consumed in order to meet basic requirements, whilst the rising income consumers tend to switch to more luxurious, attractive and expensive commodities. Fairtrade goods are sold at a premium price, therefore low income consumers would be extremely price sensitive therefore purchase goods that are relatively cheap, whereas the high income consumer would be more likely to consume fairtrade food, as they would have the resources available to spend on commodities that are quality priced goods.
Another relationship that the report would look to assess is the correlation between education and income. Table 4 illustrates the mean incomes for both males and females against different levels of education. It is evident that as the level of education increases the level of income also increases therefore generating a positive correlation between the two variables. Therefore the hypothesis would look to assess whether consumers with a high level of academic qualification would purchase more fairtrade products in comparison to consumers with less academic qualifications. Fairtrade issues may be of importance to those that are well educated, therefore are aware of conditions and circumstances of third world countries and thus Fairtrade commodities may have a greater importance for these consumers.
3.1: Potential Marketing:
Fairtrade is an alternative and increasingly important way of conducting business that brings together a diversity of producers, retailers and customers in the global market. In order for Fairtrade to increase its market share and attract a wider consumer base, it must market its products and services effectively. According to Kotler (2000) there are many strategies that could be adopted to increase a products market share, which include product development, market growth and differentiation.
New methods should be initiated to increase the market share of fairtrade products. Firstly the existing customers or ‘consumers by choice’, should be motivated in order to guarantee the continual purchase of fairtrade products, secondly the ‘traditional’ as well as ‘ethical’ consumers who seem to be satisfied by fairtrade products should be targeted to consume fairtrade commodities, finally the ‘youthful’ consumers, from an early age should be made aware of the benefits and the impact that fairtrade has on third world countries, therefore educating ‘youths’ for a ‘fairer future for trade’.
Product development is another potential marketing strategy, which could be initiated to increase market share for Fairtrade. Several studies confirm that consumers want and expect new products; therefore Fairtrade should potentially expand the product range to attract consumers and to give greater variety of fair-trade products. The distribution of fair-trade products to a large number of outlets is also necessary. Fairtrade products should be available from large supermarkets as well as smaller convenience stores throughout the year, in order to generate greater awareness and accessibility.
3.2: The Marketing Mix
The market for Fairtrade products is a market of differentiated, ethical products that primarily requires long-term strategic policies and tools in order to establish effective market conditions. There are many marketing tools that can be used to promote a particular product or brand, one set of marketing tools that Fairtrade Organisation can use to pursue its marketing objectives is to undertake analysis of its marketing mix. The marketing mix is a combination of the four Ps, which include Product, Price, Promotion and Place, these factors combined are vital in developing strategies for an Organisation.
Product is an extremely imperative element of the marketing mix as this is ultimately what consumers consume. Fairtrade have increased there product range offering fresh fruit, cocoa, chocolate, sugar, tea, fruit juice, yoghurt, herbs and spices, honey, rice and many other products.
Consumer Behaviour
From a marketing perspective, consumer behaviour is about human responses in a commercial world, understanding how and why people buy and use products, how they react to prices, advertising and other promotional tools, and what underlying mechanisms operate to help hinder consumption. When referring to consumer behaviour theory it is said that ‘ The quantity of a good demanded by consumers depends on their tastes, the price of the good, the price of substitutes and complements, consumers income, information, government and other factors’. When considering a simple supply and demand curve a normal good, a good ‘for which demand will increase when income rises…the income elasticity of demand for a normal good is positive’, as price increases the demand for the product will decrease (Q1 to Q2) therefore moving along the curve. However a change in other factors such as income and marketing activities may cause a shift in the demand curve rather than movement along, (D2)
The importance of effective marketing strategy could thus cause a shift in demand for fair-trade products. There are many responses
The qualitative primary research method that would be conducted for this report is a direct method of gathering information, via a focus group. A focus group is a group interview or debate lead by a moderator. Groups are “organised to explore a specific set of issues relating to people’s views and experiences.” (Kitzinger, 1994).
The main basis why a focus group was considered was to gather information in a relaxed and non-confrontational format. A focus group dynamics allows the respondents to interact, by listening to other people’s opinions, expressing their own view points and also it allows the researcher to ask open questions to all group members.
A focus group format was considered ideal as it allowed qualitative data to be collected about fair trade products and would allow the examination of consumer perceptions. It also illustrates to the researcher what potential problems the hypotheses may have, and therefore allows for further analysis and stimulation of new ideas.
Secondary data
Secondary data would also play an imperative role in gathering information about fair trade. Secondary data is data that is not designed for the specific research but was designed for some other purpose.
Secondary data would include journals, articles, sales figures on fair trade goods as all these would be helpful in providing information to complete the aim of the project. The theory of planned behaviour from Consumer Choice seems to be the most appropriate framework to use in terms of establishing the mindset behind consumers purchasing of fair trade commodities, therefore would use this theory in relation to consumers purchasing of fair trade commodities.
- Guide to reading
The paper consists of five chapters following Chapter 1. Chapter 2 will describe marketing strategies and would portray the importance of ‘ethics’ in marketing, and thus examine where this would lie in the consumer making decision making process. The examination of the fair-trade label would also be assessed.
The following chapter would examine consumers’ perception of fair trade products, therefore would look at previous sales figures and thus examine the history of consumption as well as assess drivers of change in relation to consumer consumption behaviour.
This would be followed by consumers perception of fair-trade products, therefore would show results from focus group and questionnaires. This would be followed by results and the final chapter would include conclusions and future challenges for the Fairtrade mark and potential implications for both Fairtrade and the consumer.
Reference page:
OCFCU - Oromia Coffee Farmers Cooperative Union, http://www.fairtrade.org.uk/producers/coffee/oromia_coffee_farmers_cooperative_ethiopia/default.aspx,
17th jan, The Fairness and Efficiency of 'Fairtrade'- title, may 03, 2006
1Source: Ransom David (2001), Introduction In: No nonsense guide to Fair Trade. (Wells & Nixon) Oxford, New Internationalist Publications.
, History, Fairtrade labelling international history, [Accessed 12th Jan, 2008]
2
Fairtrade sales double to £500m as supermarkets join trend By Martin Hickman and Karen Attwood
Monday, 25 February 2008
3
Title:
Co-op leads Fairtrade drive. By: Barnes, Rachel, Marketing (00253650), 00253650, 2/16/2005
Database:
Business Source Complete- article
Fair Trade marketing: an exploration
through qualitative research
LEN TIU WRIGHT*
Department of Marketing, Leicester Business School (Bede Island), De Montfort University,
Leicester LE1 9BH, UK
SIMON HEATON- PDF
(Co-operative)
frequently asked questions.
Perloff,J, (2001) Microeconomics, Addison Wesley Longman
